Hungary’s Central Bank Can Help Promote Growth if Prices are Safeguarded

BUDAPEST--The National Bank of Hungary is prepared to help the country's government in its efforts to promote economic growth, provided it maintains a strict fiscal policy and doesn't weaken the bank's focus on keeping inflation under control, one of the bank's seven rate setters told The Wall Street Journal.

"In the current situation, the Monetary Policy Council wants and is in a position to help the government in its aspirations to boost growth. If any [fiscal] loosening happened on that front that would drive inflation upward, the MPC would obviously react accordingly," Gyula Pleschinger, a member of the rate-setting MPC said in an interview.

Hungary's gross domestic product shrank last year and the government is now battling to kick-start the economy while keeping its budget deficit below the European Union's required 3% of GDP. Despite the recent downturn, Prime Minister Viktor Orban is upbeat about the country's economic prospects, saying the possibility of higher-than-expected growth in the second quarter may give the government more leeway with its budget plans. GDP grew by 0.7% from the previous quarter in the first three months of the year.

"Higher economic growth would automatically increase the government's room to maneuver but even then we must keep to the inflation goal," said Mr. Pleschinger, formerly a top official at the economy ministry under the current central bank Governor, Gyorgy Matolcsy.